From the EMS to the Euro: DM and Schilling Hand in Hand

The focus of this paper is on the similarities and differences of German and Austrian monetary and exchange rate policies, which are analysed against the background of the economic forces which eventually resulted in the creation of the European Monetary Union. The frontline of the struggle for achieving monetary integration in Europe ran between Germany and France, which enhances the role of the DM as an anchor currency not just for Austria, but for Europe at large. In contrast to the very active role of Germany in the monetary integration process, Austria remained virtually passive. However, utilising its experience with a hard currency policy, Austria made an essential contribution to the stability of the system as a whole. Given a history of just a few years, the stability of, and the future risks for, the European monetary system are elaborated.